DALLAS -- More than 50 school districts in North Dakota received upgrades after the state passed a law to strengthen its school credit enhancement program.
Moody's Investors Service upgraded the enhanced ratings of 58 North Dakota school districts from Aa3 to Aa2.
“The rationale for upgrading the Department of Public Instruction's School District Enhancement Program rating was based on a recent revision to the intercept legislation that strengthens the program documentation and clarifies the timing and mechanics of the notification process,” wrote Moody’s in a credit report on Tuesday.
The state’s intercept program was upgraded to Aa2 from Aa3 on Aug. 1 in recognition of legislative changes that strengthened the program documentation and clarified the timing and mechanics of the notification process. The rating is set one notch below the state's issuer credit rating, on par with the state appropriation rating, due the requirement that an appropriation must be in place for the intercept mechanism to work at all times.
The legislation included language that obligates school districts to pay debt five days before payment is due. If it is unable to make a bond payment, the school district must notify the state not less than 15 days prior to any default. Once the state is notified it will immediately advance funds to bondholders.
The legislation doesn’t address the state's right to repeal, revoke or rescind the intercept provisions but Moody’s said it nonetheless expects strong continued state support of the program “given the essentiality of public education.”
“The program has never been tested, but given strong timing and mechanics established in bond resolutions and administrative documents, there is a high likelihood of timely intercept,” according to Moody’s.